NC Budget and Tax Center

New state budget and child care: Looking like another missed opportunity

With current conference on the final budget between the House and Senate underway, a new report from the Budget and Tax Center, a project of the NC Justice Center, shows how critical the decisions will be in the coming days for the state’s youngest children.

North Carolina lawmakers last year failed to fully deploy federal dollars to their purposes and removed state commitments to child care subsidy programs, a critical tool in providing quality early childhood learning experiences to young children in low income families.  The result is that we have persistent unmet needs across the state that include: approximately 33,098 eligible children on the waiting list for child care assistance and many more eligible but not receiving child care assistance, the presence of persistent child care deserts, and barriers to enhancing quality through professional development and compensation programs for early childhood workers.

House and Senate proposals for the next two-year budget (FY 2020 and FY 2021) continue to swap federal dollars and fail to commit additional state dollars compared to current services, holding down the state’s overall commitment to keeping child care affordable and accessible.

House and Senate budget writers propose to increase total funding for the child care subsidy program for each year of the biennium budget. However, each budget proposal would reduce state support for these programs and increase federal support compared to the base budget — that is, they would shift toward a greater reliance on federal funding to support this crucial program. They also shift federal dollars further away from Temporary Assistance for Needy Families (TANF) and toward CCDBG again by the end of the biennium.[1]  As explained below, each budget doubles down on supplanting state dollars compared with FY 2019, particularly the Senate budget in year two of the biennium.

More specifically, House and Senate budget proposals for FY 2019-20 do the following:

  • The House budget supplants $7 million of state funding with federal funding for the child care subsidy program: While the budget increases funding, on net, for this program by $6.6 million in FY 2019-20, it does so by increasing CCDBG dollars by $13.4 million, increasing TANF dollars by approximately half a million dollars, and reducing state dollars by $7.1 million.[2] It makes two swaps that are worth noting: (1) It makes a permanent nearly $6.5 million cut to TANF support, which is possible due to the new CCDBG dollars, and (2) it also replaces $7 million in state funding with an equivalent amount of TANF funds on a one-time basis.While TANF dollars, on net, for this program are increased slightly for this fiscal year, the budget would cut TANF by more than $1.6 million, on net, for this program in FY 2020-21. The budget also swaps TANF dollars for state dollars in the Pre-K program. The budget would also stall progress on quality by reducing more than $500,000 of CCDBG dollars that currently fund quality initiatives to meet minimum federal requirements (rather than be above those standards).
  • The Senate budget supplants $5.4 million of state funding with federal funding for the child care subsidy program — an amount that more than doubles by FY 2020-21: While the budget increases funding, on net, for this program by $3.2 million in FY 2019-20, it does so by increasing CCDBG dollars by $9.7 million, decreasing TANF dollars by nearly $1.1 million, and reducing state dollars by $5.4 million. It also makes two swaps that are worth noting: (1) It makes a permanent cut of nearly $6.5 million to TANF support, which is possible due to the new CCDBG dollars, and (2) it also replaces $5.4 million in state funding with an equivalent amount of TANF funds on a one-time basis.

In FY 2020-21, budget writers have more than doubled the amount that it supplants in state funding to $12.6 million, effectively paid for by a nearly equivalent hike in CCDBG funding. The Senate proposal would also reduce $500,000 of CCDBG dollars that are currently funding quality initiatives to meet minimum federal requirements.

All told, the House proposes a 1.7-percent increase to the child care subsidy program in FY 2019-20 over the base budget, and the Senate proposes a 0.81-percent increase. It is unclear whether additional children can be served with this scale of commitment to the program, and instead it is likely that maintaining the operation of the program for existing children will require these dollars.

Since both proposals slightly reduce the set-aside of Child Care and Development Block Grant funds for quality initiatives to the minimal level required by the federal government, it puts pressure on other funds to cover quality efforts.

North Carolina policymakers can afford to provide children with quality early learning experiences but it requires stopping tax cuts and investing state and federal dollars to that purpose.

[1] NC General Assembly, House Bill 966: 2019 Appropriations Act, (May 2019), https://www.ncleg.gov/BillLookUp/2019/h966

[2] The budget eliminates three vacant positions, part of which are funding by receipts but it’s not clear if those are TANF or CCDBG funds or other non-state funds.

Martine Aurelien is a policy fellow at the N.C. Justice Center’s Budget & Tax Center.

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